When I inherited my oil and gas royalties oil was 90$ a barrel. It grew to about $125 a barrel about two summers ago. Now, it's around 50 bucks. Does anyone think this will turn around and the prices will ever rise and be around 80 or 90 a barrel again?
It's hard to plan to buy a home etc. with this drastic fall in payments. My royalty payments are the biggest part of my retirement income and my social security payments were just cut by 25 bucks a month! Sucks. Just wondered if anyone has followed the oil and gas markets in the past and thinks this will turn around and maybe when it will.
I think that you will find out that there is going to be an extreme volatility index for CY 2015. Right now, at $55.00 per BO, we do not know if that is a floor or a ceiling.
The price can literally change overnight if OPEC and non-OPEC producers agree to reduce output. The problem with that is that nobody follows the rules. Saudi Arabia, being a swing producer, wants to maintain market share, rather than lose market share. What I think that the result is going to be much in the style of the crashes of 1999, 2008 and 2010. "V" shaped curves with quick rebound. Marginal production cost will be the key. The strong dollar keeps international prices low on the exchange rates. This is too complex an issue to discuss in a short forum like this.
I have an online magazine, called The Morning Report, which is free and is updated almost daily. Right now the emphasis is pricing and geopolitical goings on. I knew that we were in trouble in July when a refinery in an ISIS reagion was damaged and prices went down. Something was afoot. The great Q3 report released yesterday on US GDP growth sent the stock market closing over 18000 for the frrst time ever. That will increase demand for petroproducts. Now if we get a good rebound from China, then the race is back on ---- IF Saudi Arabia decides to quit punishing OPEC over-producers and lightens up on Russian and Iran. Russia can only balance their budget at $100 per BO.
I will be producing my annual take on CY 2015 and will gift it to readers of MRF. I publish it for clients in late January, after the EIA short term energy report.
It would be nice if Mr. Pickens was right, but my money is with Mr. Cotton. Nations like Iran, Saudi Arabia and Russia are dependent up petroleum production to fund their governments. Some, like Saudi Arabia, have elaborate social welfare systems and bloated bureaucracies. It is hard to go back to the burro and camel after one has had a Mercedes. To cut back on government spending would be the end of the house of Saude.
And there are many more areas yet to be explored for petroleum deposits. The peak oil myth was just another liberal lie.
Sadly, I do not see a bright future for us. Production will happen in the countries with the lowest cost of production.
Maybe it is better to utilize the land in another more productive manner.
You won't find another industry with as many self-appointed experts. Saudi wants to bite the bullet for now anyway. They want to see U.S. shale producers go under. I saw an online interview with Pickens. He's picking a much lower bottom than $55. I'm not really sure what the bottom will be. What Pickens predicted hasn't happened yet. I'm not going to quote him. We will just have to wait and see.
The 12-18 month prediction sounds good, or it may be even higher. We will just have to wait and see.
I cannot imagine this happening, but...strike that. I can imagine this happening.
Inasmuch as Saudi Arabia is making very powerful enemies (at great speed) with great resources, can you possibly imagine the price holocaust if, for example, Russia, dropped a couple of bombs (like 500 or so) on Saudi fields? OK, that is too obvious. How would an ex KGB spymaster running the Kremlin think?
How about funding ISIS to do it? Saudi Arabia is not tolerated by ISIS for a number of fundamentalist reasons.
How about IRAN? They are turning more and more every day into an ISIS state, despite having air strikes against ISIS in Iraq. The US and Iran. Talk about strange bedfellows.
Russia has the most to gain and the most to lose. Sure, Venezuela, Iran and Nigeria are likely players as politically unstable OPEC members, but Russian is non-OPEC.
Why wouldn't Russia be pushing harder than anyone to squeeze oil supplies? Easy. It needs access to hard currency, since sanctions have limited its access to global capital markets. Russia has already offered up to OPEC that it would agree to production cuts if OPEC followed suit. OPEC said forgetaboutit.
The decline in the ruble has cushioned the price drop somewhat and the Rooskies are able to take care of core programs, but cannot balance their budget. Like the US.
This is one of those "If it happens, you heard it here first" situations.
This is a game of chess at a very, very high level.
Hmmm! ISIS is an extreme Sunni phenomenon. Someone is financing it. I suspect Saudi Arabia.
The Syrian government is controlled by the Alawites, who are a sect of Shia. The Alawites were only twelve per cent of the population of Syria before people started killing people. But through some method, they controlled Syria for years.
So, what we are seeing is a proxy war between some Sunni States and Shia Iran and its Syrian allies.
It is even more complicated when we consider that Syria has long been a client state of the Soviet Union and now Russia.
Sunni and Shia will never live peacefully. The degree of hatred is too extreme.
Then we have the Chechnians who are Sunni and controlled by Saudi Arabia. This is the soft under belly of the Russians. The Russians do not want another expensive war.
The Russians can endure a petroleum price war. They have dealt with similar problems by inflating their currency and some other ugly extreme measures. Remember the starvation of the Ukraine? They have no problem taking extreme measures.
Saudi Arabia and Iran are a different story. They both are one product nations. They failed to diversify their economies when times were good. They are vulnerable. Neither want to confront each other in a destructive and expensive war. They prefer to have this proxy war.
Who will control the middle east is yet to be resolved. But whoever it is, they will sell product as soon as possible. Who will buy this blood oil? Everyone. Everyone loves a bargain.
That is my view of the situation. Others may disagree, but time will tell.
According to the Washington Post, areas under ISIS control are rapidly falling apart due to severe mismanagement. In the Iraqi city of Mosul, the water has become undrinkable because supplies of chlorine have dried up, said a journalist living there, who spoke on the condition of anonymity to protect his safety. Hepatitis is spreading, and flour is becoming scarce, he said. "Life in the city is nearly dead, and it is though we are living in a giant prison," he said. It is much the same in the Syrian city of Raqqa, the self-proclaimed capitol of ISIS. Garbage is piling up and the streets are filled with raw sewage. This all means that their movement and influence will be short-lived. Why ? Because they are buffoons and primates, and will not be capable of any long term influence in the region.
Sadly, what you say is true, but that doesn't mean the end of a movement. Everything above also applies the Cuban regime. Remember, power flows from the barrel of a gun.
Hopefully, they too may soon lose their heads.
However, there is always the chance that the tail will wag the dog. Saudi Arabia may have created a monster that will destroy its creator.
Ooookay guys. My question seems to have triggered quite a political debate. The bottom line seems to really be "nobody knows". haha.. So, I'll just start saving more of my income in case royalty payments go back down to rock bottom again. I don't talk politics, international or otherwise so over and out.
Ooookay guys. My question seems to have triggered quite a political debate. The bottom line seems to really be "nobody knows". haha.. So, I'll just start saving more of my income in case royalty payments go back down to rock bottom again. I don't talk politics, international or otherwise so over and out.
Lynn, the reality of the oil and gas business is that it is chicken one day and feathers the next. Don't spend the money you get; invest it because the hard times always return.
Things could turn around. They could issue export permits for crude oil and natural gas. Then again, they may not. We could see vast gas and oil fields developed in places like the Ukraine and Mongolia. China is doing a lot of exploration and development.
We just don't know. We do know that production will occur where the costs are the lowest.
If you aren't watching the Million Dollar Way blog you should. It is following the happenings of the OPEC fiasco. I think last I read the oil companies believe things may swing the other way after this glut is trimmed down next year. Meanwhile, there is no great loss without some small gain-and that's at the gas station filling up the tank! Eh?
I bought a plug in hybrid electric vehicle because the price of gas was so high and with all the grumblings in the oil producing countries I thought it might be prudent to not to SO dependent on gas. Then things got better LOL (so to speak). Oh well, it's still nice to get over 600 miles to a tank of gas. :)
Robert V. Gill said:
Again, sadly the dip in prices at the pump comes after I gave up driving.
wow, if you are hit with $50 a barrel already...(October production and before crash) you really aren't going to be happy with your January and February checks. I was still at about $75 for my December checks.
There is a much better chance to predict the Super Bowl winner for 2019 than predicting when our oil prices will rebound. The Saudi's want to take the Bakken out like Walmart wants to take out Bob and Betty's grocery down the street. The Saudi's can eat the $130 million a day they are losing for a long time. If ever there was a time to root for Putin it might be now...He and his Country are hurting real bad....with that said, don't look for the United States to cry for us. The dollar is getting stronger, the sanctions are all the more effective now on Putin, Cuba seeing that Venezuela is hurting and won't be able to prop Cuba up, has probably caused them to go forward with normalizing relations with the U.S.....of course this isn't helping our exports but there is always ying and yang to things that effect global economies like oil does.
There are going to be people trying to figure out just when the bounce back will happen, they will use graphs and prior corrections or price plunges in order to predict the future.....but how can they when there never was a prior shale revolution? When a couple of guys in Saudi Arabia can simply say, "don't worry, if there is more demand we will just pump more" and the price of oil globally dives? OPEC is like NATO in my opinion...sure there are other members in NATO but we all know the U.S. is the big stick....look at all the other OPEC members that are getting killed by what the Saudi's are doing......
